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Contract Signing: 3 Tips & 5 Basic Components

Updated: November 2, 2023
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Contract Signing: What Makes a Contract?

Undergoing the contract signing process with a new client, customer, or employee can be an exciting first step in the right direction. The problem? Unless you're familiar with drafting and sending out contracts, you most likely have some questions about what goes into the agreements that you're writing for others.

The first question that many small business owners have is this: What constitutes a legally binding contract? Is there something special that I must do in order to develop a contract that protects my interests as well as the party who is signing it?

The truth is that the concept of a contract is often much simpler than many business owners believe it to be. A contract is considered legally binding when:

  1. Both parties agree (in this case, by signing) to the contract's terms and conditions
  2. Value is being exchanged between the two parties signing the contract (for example, an employment contract will exchange monetary compensation and benefits in return for services being performed)

As long as you meet these two conditions, you have, more or less, created a legally sound contract that can be signed and enforced. However, it'll depend upon what type of agreement you are creating and the complexity of your agreement. To help you better understand what considerations to make when creating your own contracts, let's take a closer look at what you'll need to focus on during the contract-drafting process.

What To Include

Every contract starts with the basics, which allow you to build a solid foundation that you can expand upon later when you begin adding specific items to the type of contract you're creating. Some of the most important items to ensure that you have in your contract include:

  • The duties of both yourself and the party signing the contract: Make sure to explain all of the duties required by you as well as the duties of the party who is entering into the contract. Without a detailed explanation of what's being expected by both parties, either party involved in the contract may be able to take advantage of that missing information. When writing contracts, the language must be precise and comprehensive.
  • What the rights of both parties are: Regardless of the relationship being developed by the contract, every party has certain rights that they're allowed to exercise throughout the duration of the contract if need be. Include these rights in the contract to inform and protect the person signing their name.
  • An overview of the value being exchanged: A contract provides everyone involved in the agreement with a clear idea of the exchange of value taking place after the contract has been finalized. Along with describing the duties, map out the value being provided by both the signing parties to guarantee that everyone knows what this new relationship will entail. The level of detail required in describing the value being exchanged may vary depending on the nature of the contract.
  • Any necessary warranties, disclaimers, or additional information that should be stated: If there are any details that further describe the value being exchanged or information that should be made known to the signing party, provide that information somewhere in your contract. If necessary, the contract should also make appropriate warranties and disclaimers to limit potential liability.
  • Indemnification and termination of the contract: When someone violates the terms of a contract, repercussions naturally ensue. Be careful to list out the consequences, legal or otherwise, that may arise from one party not adhering to their duties laid out in the contract's body.

The more detailed your contract, the better it is for you and for the signing party. From here, you'll want to conduct further research and enlist the help of a contract lawyer who can support you in your efforts. Why is this vital? This is due to the fact that there are major differences between various contract types.

For example, there are going to be crucial differences between the structure of an employment contract and an NDA. With the support of a contract lawyer, you can ensure that you're covering all of your bases and creating something mutually beneficial for your organization and the individual on the other end of the document.

Here is an article that dives deeper into some of these most essential aspects and talks more about using contract templates to help you get started.

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What To Avoid

Sometimes, the best way to understand how to ensure that the contract signing process goes smoothly is to highlight some of the biggest mistakes to avoid rather than focusing solely on everything you need to include (as this is the best way to let mistakes slip past you).

Because contracts are legally binding agreements that require careful review and consideration, it's no surprise that some small businesses will have the odd mistake or two located in their own contractual agreements. Learning from these mistakes, some of the most crucial things to avoid while creating your own contracts include:

  • Confusing or nonspecific language that allows room for interpretation
  • Items that are not enforceable within a court of law
  • Accidentally sending older versions of a contract rather than updated versions
  • Typos that can cause serious issues for either party (i.e. adding extra numbers to agreed-upon compensation)
  • A lack of information regarding litigation should certain contractual obligations not be met

Avoiding these common mistakes begins with taking more time out to discover how other businesses have made errors in their own contracts and how you can learn from these errors. Here is an excellent article detailing some of the mistakes today's business owners will make when drafting contracts and what you should be wary of in your own journey.

Streamline the Process With These Tips

In today's world, contract signing is far more efficient than it was when everything had to be printed, signed, and stored away on paper. This means that pushing through agreements and getting business done is easier than ever. If you want to make doing business easier on you, here are some tips to help you streamline the contract signing process.

  • Enlist the help of a contract lawyer: Having a contract lawyer on your side is a must if you want to ensure that your contract is legally binding and written in a way that keeps you and the signing party protected. No matter what industry your business operates in or what type of contract you need to produce, a contract lawyer will help you through the process and ensure that the final product is ready to sign.
  • Turn your attention to electronic signatures: Electronic signatures have made contract signing more secure, far simpler, and more affordable due to the lack of materials involved in the process. If you're hesitant to switch over to electronic signatures and have some reservations, read this article on the benefits of e-signing.
  • Create a specific type of contract, perfect it, then reuse it for future operations: Chances are that your small business will likely use the same types of contracts to engage with customers, clients, and beyond. Once you have found a formula that works best for you, base your future contracts on this working template. This means that all you have to do is update the information for the signing party rather than having to write up a whole new contract each time.

Creating your first contracts as a small business isn't as difficult as it sounds, but it does require careful attention to detail and due diligence. To ensure that your first contract signing and subsequent signings go smoothly, use the guide above to learn more about the basics of creating contracts, what you need to include and avoid, and how you can make the process easier on you.

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